The stock market was able to recover on Friday, from a rough morning of trading, and the three major indices closed with some modest gains for the day, and for the week. Small caps and the I-fund lagged posting losses on the day, but all four stock and bond funds, F, C, S, and I-fund, closed with gains for the week to snap some long weekly losing streaks. It was an expiration Friday which meant trading volume was exceptionally high.
I had been becoming encouraged that the market was trying to find a bottom, and while we see several indications that things have come down too far, too fast, we're still not seeing the index charts improve enough to make me feel comfortable to confirm anything. The Fed provided some comfort last week, and we're very likely getting 2 or 3 interest rate cuts before the end of the year if inflation stays under control, and while the market didn't jump for joy over their Fed Talk, the S&P 500 did close on Friday about 1% over its pre-Fed meeting closing price.
The S&P 500 (C-fund) had a very good showing on Friday, coming back from an early 1% plus morning loss to close slightly positive. That was enough to create a positive outside reversal day, which is a very bullish formation, but unfortunately until this stops languishing below the 200-day EMA, the bears still have control. It's been 11 straight closes below the average and it is starting to turn what I was hoping was a "V" bottom into a possible bear flag. This week's action will give us a lot more information as the bear flag either develops further, or the index pops back above the 200-day average where the bulls could try to take control again.
Seasonality is now on the bulls' side for a while, but that's not a guarantee - just an historical nudge in favor of the bulls.
Friday was an expiration Friday, which is why we saw the spike in trading volume. Historically these quarterly events can become reversal periods, but just looking out over the last couple of years, I don't see anything overly consistent. The S&P 500 did move higher after the prior two March expirations, but in 2024 the index actually temporarily peaked once the calendar flipped to April. It was a completely different market back then however, as the S&P rallied from November 2023 through March 2024 before that peak. That's not what we've seen this year.
Investor sentiment is still very bearish, which tends to be a good thing when at an extreme. Bulls to bear ratios of 0.50 or less (2 bears for every bull) tends to indicate an exhaustion on the selling side and last week was the third straight weekly reading blow that level.
We get some economic data this week that could matter. The PCE Prices data is a key inflation indicator and it comes out on Friday of this week. There are also a couple of consumer sentiment indicators this week, which has become in focus since the recent surprisingly low Michigan Survey numbers. We also get some rear-view mirror GDP estimate numbers for the 4th quarter of 2024, bur that's not as important looking forward.
There are a lot of uncertainties out there and the market is trying to price in the unknowns of tariffs and the economic forecasts which are all over the map. Earnings season is starting to kick in and that may help clear things up, or at least we may get a feel for how companies are preparing for the current situation, so volatility could remain elevated.
The futures opened quite positive on Sunday evening - right about up to that stubborn 200-day average, so let's see if that can hold into the close or if the bears will be selling in that area again.
The DWCPF (S-fund) has some good signs, and many bad. The failure at the 300-day EMA (red) is clear, and being below the 200-day average all month are both certainly signs of poor action, but the fact that the 200 is above the 300, and the 100-day average is above the 200, and the 50 is above the 100, makes this a fairly orderly pullback / correction. When they start crossing each other we will count those as warnings. It is very possible that the convergence of these will precede a low, and if not, perhaps a meaningful bounce. But it really needs to recapture the 300 day average soon.
The ACWX (I-fund) continues to hold up well but the double top pullback may have started this month. If it can get back above 57 for a few days, the door would be open to another leg higher. Until then, a move to 56 or even back to 55 is possible.
BND (F-fund) was down modestly and it too experienced a minor double top dip late last week. The trend is up and support is rising. I like the chart formation as long as this remains above 72.75.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
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I had been becoming encouraged that the market was trying to find a bottom, and while we see several indications that things have come down too far, too fast, we're still not seeing the index charts improve enough to make me feel comfortable to confirm anything. The Fed provided some comfort last week, and we're very likely getting 2 or 3 interest rate cuts before the end of the year if inflation stays under control, and while the market didn't jump for joy over their Fed Talk, the S&P 500 did close on Friday about 1% over its pre-Fed meeting closing price.
The S&P 500 (C-fund) had a very good showing on Friday, coming back from an early 1% plus morning loss to close slightly positive. That was enough to create a positive outside reversal day, which is a very bullish formation, but unfortunately until this stops languishing below the 200-day EMA, the bears still have control. It's been 11 straight closes below the average and it is starting to turn what I was hoping was a "V" bottom into a possible bear flag. This week's action will give us a lot more information as the bear flag either develops further, or the index pops back above the 200-day average where the bulls could try to take control again.
Seasonality is now on the bulls' side for a while, but that's not a guarantee - just an historical nudge in favor of the bulls.
Friday was an expiration Friday, which is why we saw the spike in trading volume. Historically these quarterly events can become reversal periods, but just looking out over the last couple of years, I don't see anything overly consistent. The S&P 500 did move higher after the prior two March expirations, but in 2024 the index actually temporarily peaked once the calendar flipped to April. It was a completely different market back then however, as the S&P rallied from November 2023 through March 2024 before that peak. That's not what we've seen this year.
Investor sentiment is still very bearish, which tends to be a good thing when at an extreme. Bulls to bear ratios of 0.50 or less (2 bears for every bull) tends to indicate an exhaustion on the selling side and last week was the third straight weekly reading blow that level.
We get some economic data this week that could matter. The PCE Prices data is a key inflation indicator and it comes out on Friday of this week. There are also a couple of consumer sentiment indicators this week, which has become in focus since the recent surprisingly low Michigan Survey numbers. We also get some rear-view mirror GDP estimate numbers for the 4th quarter of 2024, bur that's not as important looking forward.
There are a lot of uncertainties out there and the market is trying to price in the unknowns of tariffs and the economic forecasts which are all over the map. Earnings season is starting to kick in and that may help clear things up, or at least we may get a feel for how companies are preparing for the current situation, so volatility could remain elevated.
The futures opened quite positive on Sunday evening - right about up to that stubborn 200-day average, so let's see if that can hold into the close or if the bears will be selling in that area again.
The DWCPF (S-fund) has some good signs, and many bad. The failure at the 300-day EMA (red) is clear, and being below the 200-day average all month are both certainly signs of poor action, but the fact that the 200 is above the 300, and the 100-day average is above the 200, and the 50 is above the 100, makes this a fairly orderly pullback / correction. When they start crossing each other we will count those as warnings. It is very possible that the convergence of these will precede a low, and if not, perhaps a meaningful bounce. But it really needs to recapture the 300 day average soon.
The ACWX (I-fund) continues to hold up well but the double top pullback may have started this month. If it can get back above 57 for a few days, the door would be open to another leg higher. Until then, a move to 56 or even back to 55 is possible.
BND (F-fund) was down modestly and it too experienced a minor double top dip late last week. The trend is up and support is rising. I like the chart formation as long as this remains above 72.75.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We may use additional methods and strategies to determine fund positions.
